Thursday, January 29, 2015

Cash In On The Currency Wars Using ETF's ?

Summary

The US Dollar strength is impairing
sales and profits for manufacturers.

European politics is creating turmoil
for the Euro and that will impact many currencies.

We have tools and alternative tools to
exploit fluctuations in currency ETF's.

Let's have a look at this chart I have
constructed using Relative Strength factor of a US Dollar Index
ETF(UUP) and six ETF's which are used to make up the US Dollar Index.

The six US Dollar Index component ETF's
I have selected are Guggenheim FXF,FXB,FXC, FXC, FXY, FXS
representing Swiss Franc, British Pound, Canadian Dollar, Japanese
Yen, Euro, Swedish Krona.

You may ask, 'What good is this
comparison chart?'

At some point the distances between
these plots will start to narrow based on the actions of the various
governments and markets and whatever manipulations may occur in order
for different currencies to gain or lose advantages.

We need only look at what has occurred
in the past couple of weeks with the Swiss Franc, the Canadian Dollar
and the Euro.

This next chart reflects the Relative
Strength factor of the seven Etf''s that I am using, you can see that
FXF, Swiss Franc, is outperforming the other component currency ETF's
and that is based on the sharp move generated by Swiss government
intervention a few days ago.

How can we use this chart?

Interestingly enough, each government
involved as well as the EU is attempting to capture markets and they
are going to do their best to manipulate their own currency and any
other currency to their advantage. Volatility in currencies as well
as stocks is being created daily with the manipulations.

I gathered some information from Point
and Figure charts at Stockcharts.com and am going to list the target
prices for each of these currency ETF's. The numbers may surprise
you.

FXF 151.00

FXB 210,00

FXC 84.00

FXY 62.00

FXE 86.00

FXS 82.00

USDX 128.00 (P&F target for UUP
unavailable)

From those targets you can see huge
differences from prices today, there will certainly be some activity
as months pass. P&F targets are not guaranteed, I used them only
as an illustration.

What can we use to take advantage of
these pending moves. There are many choices , however UUP and UUD may
be quite suitable for most people as those represent long and short
respectively. Some may favor using the PowerShares 3x Long UUPt or
the PowerShares 3x Short UDNT.

I have compared the four of these as
follows.

Using Relative Strength factor for
comparison is most useful for trade selection and also trade
management and may add another dimension to your trading system.

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About Me

This Blog is for entertainment and educational purposes only. Nothing on this site is to be construed as a suggestion or recommendation for trading. Trading is quite risky, for trading advice please consult with your registered adviser.

Dave MacKay is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to amazon.com.